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Transfer Program Complexity and the Take-Up of Social Benefits

  • Henrik Jacobsen Kleven
  • Wojciech Kopczuk

We model complexity in social programs as a by-product of the screening process. While a more rigorous screening process may improve targeting efficiency, the associated complexity is costly to applicants and induces incomplete take-up. We integrate the study of take-up with the study of rejection (Type I) and award (Type II) errors, and characterize optimal programs when policy makers choose screening intensity (and complexity), an eligibility rule, and a benefit level. Consistent with many real-world programs, optimal programs feature high complexity, incomplete take-up, classification errors of both Type I and II and, in some cases, "excessive" benefits. (JEL D04, D82, H23, I18, I38)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/pol.3.1.54
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Article provided by American Economic Association in its journal American Economic Journal: Economic Policy.

Volume (Year): 3 (2011)
Issue (Month): 1 (February)
Pages: 54-90

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Handle: RePEc:aea:aejpol:v:3:y:2011:i:1:p:54-90
Note: DOI: 10.1257/pol.3.1.54
Contact details of provider: Web page: https://www.aeaweb.org/aej-policy
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